A hurricane’s grim reminder for AEC firms

Jan 08, 2023

As natural disasters continue to increase in frequency and severity, so will the potential exposure to the design community.

Whenever a catastrophic weather event occurs, our thoughts go first and foremost to those whose lives have been dramatically, often permanently affected. Because of the rising temperatures of both water and air as a result of climate change, the impact of storms, fires, droughts, freezes, and floods have taken on new significance. For design firms, that means facing the reality that they operate in a changed landscape fraught with natural perils that are continuing to evolve.

Hurricane Ian has been described as a 500-year storm, as was Hurricane Harvey several years ago. Ian will likely ultimately be ranked as one of the top five most costly weather events in the United States, following Hurricane Katrina at $186 billion and Hurricane Harvey at $149 billion.

As hurricanes and other natural disasters continue to increase in strength and frequency, so does the amount of damage left in their wake. Although it’s hard to imagine that litigation would follow these natural disasters, novel theories often surface in their aftermath. And, unfortunately for the design community, there is almost always an expert willing to testify there was a breach of the standard of care.

Following Hurricane Harvey, there was at least one class action suit regarding site changes to commercial property that allegedly caused additional water runoff onto a large area of an adjacent homeowner’s property. While there undoubtedly would have been more than five feet of water entering the homes regardless of that work, the claim was it increased the amount of water by a matter of inches. Not only were there experts willing to testify that it was reasonably foreseeable that this 500-year storm would occur and that the increased runoff would cause additional damage, there were also experts willing to testify that the inches of added water caused millions of dollars in additional damage.

The case was brought on behalf of hundreds of homeowners by a well-known, very capable plaintiff’s law firm in a jurisdiction where nearly everyone on the jury would have suffered similar losses in the storm. The Court refused to dismiss the lawsuit. In light of the cost of continuing the litigation, as well as the real possibility that there would be an adverse verdict and that the potential exposure would be vastly in excess of available insurance, the case was settled despite the extremely questionable liability.

This illustration of a climate-related matter that led to a lawsuit was an actual example, but it’s not hard to envision lawsuits relating to wind loading, fire protection, excessive heat, unusual cold and flooding, and other circumstances that in the past the court may have considered an “Act of God.” What, if anything, can be done to avoid what may seem unavoidable?

We know that the standard of care for a design professional is a duty to exercise the degree of learning and skill ordinarily possessed by a similarly situated design professional practicing in the same or similar locality and under similar circumstances. Additionally, the first tenet of nearly every professional design license is the duty to protect the health, safety, and welfare of the public.

As natural disasters continue to increase in frequency and severity, so will the potential exposure to the design community. This risk is significantly greater in areas where building codes are insufficient. Codes are the minimum design requirements, so even if code requirements are satisfied, the standard of care may render parties liable for not designing to address conditions that could have been reasonably foreseeable and could lead to injury or damage.

How do you balance the potential responsibility to design to something more than the code against your client’s desire to build the most cost-effective project? And what can be done to protect yourself?

There are no absolute protections, but communication and documentation can help. Discuss with your client what potential climate change impacts they might want to consider. Be sure to contemporaneously document these discussions with specificity. Explain to the client that design firms cannot simply rely on codes and standards to meet their professional obligation to design for public health, safety, and welfare and that you are bound to consider the well-being of users and the community along with the client’s specific financial interests.

In addition to the informed consent documentation outlined above, you might also include language in your contract to reduce your professional exposure. Unfortunately, while waivers of claims and limitations of liability from clients can be helpful, the largest claims in these post-event scenarios can come from third parties. An indemnification by the client for third-party claims could help address this exposure if the client is solvent or insured when claims are made.

Admittedly, however, these types of agreements may be difficult to negotiate. A restriction of third-party beneficiaries could likewise be beneficial and may be easier to negotiate.

In closing, the best way to protect yourself may simply be to be aware of the potential exposure, and to consider and discuss with your client the possible future risks that could be caused by climate change. Adapt the design if your client will agree with your recommendations and document the critical discussions as they occur. Analyze to whom your primary exposure might be and do your best to negotiate terms and conditions that will protect your firm from future claims.  

Lauren Rhodes Martin is a risk manager and claims specialist at Ames & Gough. She can be reached at lmartin@amesgough.com.

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About Zweig Group

Zweig Group, three times on the Inc. 500/5000 list, is the industry leader and premiere authority in AEC firm management and marketing, the go-to source for data and research, and the leading provider of customized learning and training. Zweig Group exists to help AEC firms succeed in a complicated and challenging marketplace through services that include: Mergers & Acquisitions, Strategic Planning, Valuation, Executive Search, Board of Director Services, Ownership Transition, Marketing & Branding, and Business Development Training. The firm has offices in Dallas and Fayetteville, Arkansas.